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Makena foreclosure could also shutter Maui Prince


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POSTED: Tuesday, September 01, 2009

The recent foreclosure of the Makena Resort has set into play a chain of events that could lead to the closure of the Maui Prince Hotel and Makena Golf Course and cost about 380 workers their jobs.

Maui Prince Hotel LLC was forced to terminate its management contract after lenders of the Makena Resort failed to meet funding obligations, Prince Resorts Hawaii President Donn Takahashi said yesterday.

“;This is a heartbreaking scenario,”; Takahashi said. “;The Maui Prince Hotel is a well-run operation with a great heritage, excellent potential and wonderful employees that has fallen prey to the economic downturn.”;

Possible closure was sent in motion Aug. 24 when a consortium of lenders led by Wells Fargo Bank filed a foreclosure complaint in state Circuit Court alleging that Makena Hotel LLC, which owns the Maui Prince Hotel; Makena Golf LLC, which owns the Makena golf courses; and other affiliated companies owning land in the Makena Resort defaulted on their loan.

“;Maui Prince Hotel LLC cannot continue to operate the hotel without adequate assurance that funds will be made available to pay for payroll and operating expenses for the hotel and golf course,”; said Takahashi, adding that as such, the management contract will expire Sept. 16. Plans are in place for Prince Resorts of Hawaii to honor this Friday's payroll if the lender does not meet its obligation, he said.

Resort employees were informed yesterday that they would receive up to 60 days of wages and benefits if they lost their jobs as a result of the foreclosure and restructuring, Takahashi said.

However, Maui Prince Hotel's mortgage lender is expected to appear in court today to ask that a receiver be appointed so the resort can continue operating, he said.

“;We will ask the 2nd Circuit Court on Maui tomorrow to appoint a receiver to take over operation of the resort,”; said Barry Sullivan, an attorney for Wells Fargo Bank.

“;If approved, the receiver and its team will transition to a new management company to be approved to operate the Maui Prince Hotel and Makena Resort.”;

Wally Zimmermann, a spokesman for Wells Fargo Bank, said the company wants to retain as many workers as possible to keep the resort running smoothly and protect its investments but that some layoffs could occur.

“;It's probably realistic to expect that there would be some layoffs because the hotel is not operating at a profit,”; Zimmermann said. “;They have to have a plan to make it viable.”;

Takahashi said Maui Prince Hotel LLC will keep an open mind with the receiver “;as long as it is in the best interest of our employees and guests.”;

Since closed-down hotel properties lose value, the lender will want to keep the hotel open as long as possible, said Joseph Toy, president and chief executive officer of hotel consultancy Hospitality Advisors LLC.

“;It's always easier to sell a property when it has ongoing operations,”; Toy said. “;Hotels deteriorate fairly rapidly.”;

Even if the property keeps running, it could be hard for the lender to find a buyer, he said.

“;Given the credit market, the amount of debt on the property and the fact that they are closing it, I don't think that there will be a lot of bidders that would come forward that would satisfy the lenders' needs,”; Toy said. “;It's a tough proposition.”;

The downturn in real estate values, the dip in visitor arrivals and the credit crunch have put tremendous pressure on hotel owners to operate their properties, Toy said.

“;If this hotel closes it will be significant, but there have been others like the Ilikai and the White Sands Waikiki Resort Club that were impacted during this cycle,”; he said. “;And I think that there is definitely a greater possibility in this cycle that there will be more closures than in any other cycle.”;